Yates Property Corporation v Boland
[1998] FCA 926
•5 AUGUST 1998
FEDERAL COURT OF AUSTRALIA
COSTS – successful respondent deprived of costs
EVIDENCE – expert evidence – whether expert evidence in matters of law is desirable – use to which such evidence may be put
NEGLIGENCE – solicitors - standard of care - solicitor having or professing to have expertise in particular area of law – standard of care commensurate with expertise - whether retaining counsel absolves solicitor from giving advice – whether solicitor entitled to follow counsel’s advice – barristers – whether junior counsel is required to give advice when senior counsel is retained – immunity from suit – failing to advise on item of compensation not within immunity
VALUATION – compulsory acquisition – method of determining compensation – meaning of market value – comparative method – land residual method - special value – value to the dispossessed owner – land available for immediate development – whether of economic value – whether part of special value
Arkaba Holdings Limited v Commissioner of Highways [1970] SASR 94 followed
Apro Developments Ltd v Province of British Columbia (1977) 15 LCR 97 referred to
Bailey v Isle of Thanet Light Railways Company [1900] 1 QB 722 considered
Baringa Enterprises Pty Ltd v Manly Municipal Council (1965) 15 LGRA 201 applied Chapman v The Minister [1966] 2 NSWR 65 referred to
Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Ltd (1947) 74 CLR 358 referred to
Commonwealth v Arklay (1951-1952) 87 CLR 159 referred to
Davy-Chiesman v Davy-Chiesman [1984] 1 All ER 324 referred to
Devries v Australian National Railways Commission (1992-1993) 177 CLR 472 referred to
Duchess of Argyll v Beuselinck [1972] 2 Lloyd’s Rep 172 distinguished
Eagle v Charing Cross Railway Company (1867) 30 LJCP 297 considered
Ergopex Pty Ltd v Meerkin & Apel (1996) V.Con.R 54-550 referred to
Francis v Francis [1956] P 87 referred to
Gianarelliv Wraith (1988) 165 CLR 543 applied
Greenough v Minister of Lands and Forests) (1974) 10 NSR (2d) 598 referred to
Halifax v S Cunard & Co [1975] 1 SCR 458 referred to
Hawkins v Clayton (1987-1988) 164 CLR 539 followed
Housing Commission of NSW v Falconer (1981) 1 NSWLR 547 followed
Kennedy Street Pty Ltd v The Minister [1963] NSWR 1252 applied
Lake Erie & Northern Railway Co v Brantford Golf and Country Club (1917) 32 DLR 219 discussed
Liverpool City Council v Irwin [1977] AC 239 referred to
Macrae v Stephens, (unreported, Court of Appeal New South Wales, 18 October 1996) referred to
Melwood Units Pty Ltd v Commissioner of Main Roads (Qld) (1978) 19 ALR 453 considered
Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] 1 Ch 384 followed
Minister Administering the Heritage Act 1977 v Haddad (1988) 67 LGRA 438 referred to Municipality of Metropolitan Toronto v Loblaw Groceterias Ltd [1972] SCR 600 discussed
Orchard v South Eastern Electricity Board [1987] 1 QB 565 referred to
Pastoral Finance Association Limited v The Minister [1914] AC 1083 applied
Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735 referred to
Pointe Gourde Quarrying & Transport Company Limited v Sub-Intendent of Crown Lands [1947] AC 565 referred to
Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer Vizagapatam [1939] AC 302 distinguished
Re LeBlanc and City of Halifax (1967) 66 DLR (2d) 15 referred to
Re Schooley and Lake Erie & Northern Railway Co (1915) 25 DLR 537 discussed
Rees v Sinclair [1974] 1 NZLR 180 applied
Rogers v Whitaker (1992) 175 CLR 479 followed
Rondel v Worsley [1969] 1 AC 191 referred to
Russell v Minister for Lands 17 NZLR 241 referred to
Saif Ali v Sydney Mitchell & Co [1981] AC 198 discussed
Spencer v Commonwealth (1906-1907) 5 CLR 418 considered
Stebbing v The Metropolitan Board of Works (1870) 40 LJQB 1 considered
The Moreton Club v The Commonwealth (1948) 77 CLR 253 at 257 referred to
Turner v Minister of Public Instruction (1955-1956) 95 CLR 245 considered
Voli v Inglewood Shire Council (1962-1963) 110 CLR 74 mentioned
Wyong Shire Council v Shirt (1979-1980) 146 CLR 40 mentioned
Yarn Traders Pty Ltd v MMBW [1970] VR 427 referred to
Yates Property Corporation Pty Ltd v Darling Harbour Authority (unreported, Land and Environment Court, Cripps CJ, 1 April 1992) referred to
Yates Property Corporation Pty Ltd (in liquidation) v Darling Harbour Authority (1991) 24 NSWLR 156 discussed
YATES PROPERTY CORPORATION (in liquidation)
v JOHN BOLAND (as representative of Abbott Tout Russell Kennedy Solicitors), THEODORE SIMOS and JOHN WEBSTER
NG 495 of 1997
NG 716 of 1997
YATES PROPERTY CORPORATION (in liquidation) and IAN FRANCIS YATES
v JOHN BOLAND (as representative of Abbott Tout Russell Kennedy Solicitors), THEODORE SIMOS and JOHN WEBSTER
NG 717 of 1997
DRUMMOND, SUNDBERG & FINKELSTEIN JJ
5 AUGUST 1998
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
DISTRICT REGISTRY
NG 495 of 1997
NG 716 of 1997
BETWEEN:
YATES PROPERTY CORPORATION
AppellantsAND:
JOHN BOLAND (as representative of Abbott Tout Russell Kennedy Solicitors), THEODORE SIMOS and JOHN WEBSTER
Respondents
NG 717 of 1997
BETWEEN:
YATES PROPERTY CORPORATION and IAN FRANCIS YATES
AppellantAND:
JOHN BOLAND (as representative of Abbott Tout Russell Kennedy Solicitors), THEODORE SIMOS and JOHN WEBSTER
Respondents
JUDGES:
DRUMMOND, SUNDBERG & FINKELSTEIN JJ
DATE OF ORDER:
5 AUGUST 1998
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
The appeals be allowed.
The orders made by Branson J on 5 June 1997 be set aside and in lieu thereof it be ordered that the proceeding be remitted to another Judge of the Court for the assessment of damages against the first and third respondents.
The orders made by Branson J on 14 August 1997 be set aside.
The first and third respondents pay the appellant’s costs of the appeals in NG 495 of 1997 and NG 716 of 1997.
The respondents pay Ian Francis Yates’ costs of the appeal in NG 717 of 1997.
Note: Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA
DISTRICT REGISTRY
NG 495 of 1997
NG 716 of 1997
BETWEEN:
YATES PROPERTY CORPORATION
AppellantsAND:
JOHN BOLAND (as representative of Abbott Tout Russell Kennedy Solicitors), THEODORE SIMOS and JOHN WEBSTER
Respondents
NG 717 of 1997
BETWEEN:
YATES PROPERTY CORPORATION and IAN FRANCIS YATES
AppellantAND:
JOHN BOLAND (as representative of Abbott Tout Russell Kennedy Solicitors), THEODORE SIMOS and JOHN WEBSTER
Respondents
JUDGES:
DRUMMOND, SUNDBERG & FINKELSTEIN JJ
DATE:
5 AUGUST 1998
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
THE COURT: The principal issue raised by this appeal is whether Abbott Tout Russell Kennedy (Abbott Tout), a firm of solicitors represented in the proceeding by the first respondent, and John Webster, a member of counsel, were negligent in their conduct of a compensation claim on behalf of Yates Property Corporation Pty Ltd (Yates) before the Land and Environment Court (NSW). If they were negligent then the question arises whether Abbott Tout or Mr Webster is immune from liability in consequence of the principles laid down in Gianarelliv Wraith (1988) 165 CLR 543.
Yates had purchased three parcels of land in Darling Harbour in 1981. The combined area of the land was 1.542 hectares. The purchase price was $5.1 million. In late 1981 or early 1982 Yates decided to investigate the possibility of developing the land as a market place. A study was undertaken of the operation of Paddy’s Market which was operating nearby and which the government of New South Wales had announced would be relocated. Other investigations were conducted as well. The result of them was that Yates decided that it would be profitable to develop the land as a market. It sought expressions of interest from prospective stallholders and obtained the written agreement from some forty of them to take a stall if the market was constructed. The prospective stallholders each paid a deposit of two months rent. In 1983 consultants were engaged to carry out the work that was necessary in order to obtain approval from the Sydney City Council to develop the land as a market. That approval was given on 13 August 1984. Yates also engaged architects to prepare plans for a proposed market building. In 1984 the existing structures on the land were demolished and a builder was retained to carry out the construction of the building in accordance with the plans that had been prepared. On 20 July 1984 Yates obtained the authority of the Sydney City Council to construct a market building that would house 896 market stalls. Consequently Yates was in a position where it could commence its development of the market almost immediately. The expenditure that had been incurred to reach that stage exceeded $2.7 million.
The project was interrupted when on about 4 June 1984 Yates was informed by the Director of Public Works (NSW) that the land was likely to be resumed by the soon to be established Darling Harbour Authority. The Director advised Yates to hold its development proposals in abeyance until the Authority could consider the matter.
Yates retained Abbott Tout to advise what action it could take to prevent the land being resumed. Abbott Tout suggested that experienced senior counsel (Mr Hemmings QC) be asked to give that advice. Subsequently, proceedings were instituted by Yates for the purpose of preventing the Authority compulsorily acquiring its land but those proceedings proved to be unsuccessful.
On 7 May 1985 the land was acquired by the Darling Harbour Authority pursuant to the Darling Harbour Authority Act 1984 (NSW). Consequently the Authority became liable to pay compensation to Yates to be assessed according to the value of the land: see s 12C of the Darling Harbour Authority Act and s 124 of the Public Works Act 1912 (NSW). The Land and Environment Court had exclusive jurisdiction to hear and determine the claim for compensation: see s 24 of the Land and Environment Court Act 1979 (NSW).
Abbott Tout was retained to act on the claim. Senior counsel and junior counsel were also retained. Mr Webster was the junior counsel. He was a qualified and experienced valuer who for many years had worked in the New South Wales Valuer General’s Department. In 1965 Mr Webster commenced to study law and after gaining his qualifications was called to the Bar in 1973. By 1985 the greater part of his practice was conducted before the Land and Environment Court.
Yates filed its claim for compensation with the Land and Environment Court on 2 January 1986. Two months later, on 10 March 1986, the Supreme Court of New South Wales ordered that Yates be wound up on account of its insolvency and Mr B R Silvia was appointed as its liquidator. Mr Silvia remained the liquidator of the company until some time after the conclusion of the proceedings before the Land and Environment Court.
The preparation of the case for trial took considerable time. Little work was done in 1986 while the liquidator was making arrangements with the secured creditors of Yates to fund the litigation. During 1987 and most of 1988 Abbott Tout collected a vast quantity of documents that were required to properly instruct the valuers who were to be called to give evidence about the value of the land. Detailed preparation of the evidence did not begin until 1989.
The work performed by Abbott Tout was undertaken by Mr B Schwaiger. He had been admitted to practice as a solicitor in August 1987 and joined Abbott Tout the following month. In October 1987 Mr Schwaiger was instructed by his principals to handle the claim. Mr Schwaiger knew nothing about the law relating to the compulsory acquisition of land and he knew nothing about the law relating to the valuation of land. At no stage did he acquaint himself with the basic principles involved.
Three valuers, Mr K J Parkinson, Mr C A Woodley and Mr F K Egan, were retained to give evidence on behalf of Yates. Each was an experienced and highly regarded expert in his field. During 1989 draft valuations were prepared by them. Mr Webster was provided with copies of the drafts and he spent time in conference with the valuers going over them. When the valuations were in final form they were considered by Mr Simos QC who in mid-1989 had been briefed to appear at the trial on behalf of Yates.
In his valuation Mr Parkinson expressed the opinion that the market value of the resumed land was $51,825,000. The method by which he arrived at this figure appears from the following extract from his valuation:
“Based on the sales information shown on the annexed sales schedules and available rental information, we are of the opinion that the market value of the subject lands at the date of vesting, excluding any items of special value, disturbance or abortive expenditure was: -
Present value of $8,062,404 pa being net rental of stalls
and car park (see Annexure 2) for 9 years deferred 1.5 years at
10 per cent $40,246,155
Present value of $5,793,110 pa for one year at 10 per cent
deferred 6 months $5,235,602
$45,481,757
Less 5 per cent risk/contingency factor $2,274,087
$43,207,670
Less building costs and holding charges $6,185,713
Value of site plus interest with BA/DA for limited
period markets $37,021,957
Re-development value of main site based on comparable
sales 14,746 square metres less road widening of approximately
145 square metres = site area of 14,601 square metres at
$2,142 = $31,421,352
Less penalty costs of $1,385,000 = $30,036,352 - deferred
10.5 years at 5 per cent $17,995,318
Add redevelopment value of James Street property:
670 square metres at $1,614 $1,081,381
$56,098,656
Less loss of interest on land (ex James Street site), 16.5
per cent pa for 6 months $4,275,417
$51,823,239”
Say $51,825,000
Thus, according to Mr Parkinson, the market value of the resumed land comprised the sum of the value of the site for use as a market for ten years and the value of the site for some other commercial development to be undertaken after ten years.
Mr Parkinson assessed the special value of the resumed land to be $75 million. This amount was inclusive of the market value of the land. He determined the special value of the land by reference to the value of the only other comparable market, Paddy’s Market, the leasehold interest of which had been purchased for $43 million in early 1988. Mr Parkinson was of the view that the special value of the resumed land to Yates was properly to be assessed by what Yates or any other prudent purchaser would be required to pay to obtain an alternative market.
Mr Woodley said that the special value of the resumed land was $51.27 million. He determined the special value of the land on the assumption that the market development had been completed and was fully operational at the date of resumption. The following extracts from his valuation explain the reasons:
“In respect of the markets site we have taken the view that the owners are entitled to be compensated on the basis of payment of a monetary consideration adequate to place them in a position no worse than they would have enjoyed if such steps towards resumption had not been taken on the assumption that at the date of resumption Yates Property Corporation could reasonably have expected to have completed the approved development of the Harbour Street site and have commenced operation as a four day market and night parking business.
This assumption in favour of the dispossessed owners is considered to be the proper and appropriate approach in assessing the special value for determination of compensation.
...
[W]e have taken the view that the special value of this land to the owners may be taken to be the price a hypothetical purchaser in the position of the owners would have been willing to pay to retain such land inclusive of the assumed benefit of being occupied by an operating market together with a perceived potential for future development of air space above the markets.”
In an annexure to his valuation Mr Woodley provided a calculation of the market value of the site component of the land. He estimated that value to be $35 million for one part of the land (sometimes referred to as the Harbour Street site) and $870,000 for the remainder of the land (sometimes referred to as the James Street site). Mr Woodley arrived at the site value of the Harbour Street site by deducting from the value of that land, determined on the basis that it contained an operational market, the costs of constructing a market building and certain other costs.
The most conservative of the three valuers was Mr Egan. In his view the market value of the land based on comparable sales was $28.08 million to which he thought there should be added $10.5 million for its special value to Yates. He determined the special value of the land by having regard to what a prudent investor would pay to derive the income that was expected from an operational market on the land. He explained the basis of his approach as follows:
“At the date of resumption the hypothetical purchaser could earn an estimated $4,500,000 on an expenditure of $35,737,000 which equates to 12.6% net return. This attractive return would reflect the enterprise of the owners (Yates Property Corporation Pty Limited) in developing the concept and obtaining the development and building approvals and acquiring the uniquely suitable site for such an enterprise.
It is considered because of their enterprise the site has a special value to them over and above the market value of the land at the date of resumption.
...
Having regard to the predicted cost to a prudent purchaser in the position of Yates Corporation, and that Yates market would have been functioning at the time of resumption at a cost of $35,737,000 then the Yates Corporation would need to expend an additional $14,263,000 to replace its annual income.”
The capital cost of replacing the lost income from the market, namely $14,263,000, formed the basis of the assessment of special value. Mr Egan discounted this amount to arrive at the figure of $10.5 million for the reason that Yates had not actually taken the step of constructing the market.
Thus, in one way or another each valuer arrived at one of his valuations of the resumed land on the assumption that an income producing market had been built on the site. Mr Webster explained why the valuers had taken that approach. It was for the reason that if Yates had not been told in June 1984 to suspend the development of the site it would have been completed at the date of resumption. Mr Webster thought it was “just so unfair” if compensation could not be assessed on that basis. There was another reason. In Pointe Gourde Quarrying & Transport Co v Sub-Intendent of Crown Lands [1947] AC 565 the Privy Council held that compensation should not be assessed by reference to any increase in value of the resumed land brought about by the very scheme of which the resumption forms an integral part and in Melwood Units Pty Ltd v Commissioner of Main Roads (Qld) (1978) 19 ALR 453 the Privy Council held that the principle operates in reverse. So it was arguable that Yates should not be prejudiced by the fact that it had stopped its proposed development of the land in June 1984 on receipt of the letter from Director of Public Works.
The trial in the Land and Environment Court commenced on 30 January 1990 before Cripps CJ. It went for about eight weeks. On 1 May 1990 Cripps CJ handed down his decision: see Yates Property Corporation Pty Ltd v Darling Harbour Authority (1990) 70 LGRA 187. He fixed the compensation payable to Yates at $22,334,500.
Cripps CJ determined the quantum of the compensation in the following way. Three valuers had been called by the Authority. They gave evidence of the value of the resumed land based upon the sale of comparable land. In their view the highest and best use of the land included use as a market but none of them was of the view that that use gave the land any special value. His Honour did not accept that this was so. Counsel for Yates had submitted that in order to assess compensation it was proper for Yates’ valuers to assume that the market buildings had been constructed and that the market was operational. Cripps CJ rejected this submission. His Honour said that it was not appropriate to value the land otherwise than in its physical condition at the date of resumption but that it was proper to have regard to “the potentiality of the subject site by reason of its size and location for use as a market”: 70 LGRA at 201. Therefore his Honour said that the compensation payable to Yates should be assessed at a figure in excess of the market value of the land. His Honour fixed the amount of compensation “by reference to the sales evidence [that is, evidence of the sale price of comparable land] and [taking] into account the special value of the land to Yates by reason of its potential for use as a market”: 70 LGRA at 205.
An appeal was taken to the Court of Appeal of New South Wales: the decision is reported as Yates Property Corporation Pty Ltd (in liquidation) v Darling Harbour Authority (1991) 24 NSWLR 156. The Court of Appeal confirmed the rejection by Cripps CJ of the method of valuation employed by the three valuers. The principal judgment of the Court of Appeal was delivered by Handley J. In relation to Mr Parkinson’s assessment of market value his Honour said (at 175) that Mr Parkinson’s approach “is contrary to the fundamental principle that what must be valued is the property taken in the condition in which it existed at the date of resumption.” Two cases were referred to that were said to support this view. The first was a decision of the Privy Council in Raja Vyricherla Narayana Gajapatiraju v The Revenue Divisional Officer, Vizagapatam [1939] AC 302 and the second a decision of the High Court in Turner v Minister of Public Instruction (1955-1956) 95 CLR 245. Based on these authorities his Honour described Mr Parkinson’s valuation as “contrary to legal principle”. The other valuations, to the extent that it appeared that they also proceeded on the assumption that the market buildings had been erected and that markets were in operation, were also held to be “legally flawed”: as to Mr Woodley’s valuation see 24 NSWLR at 179 and as to Mr Egan’s valuation see 24 NSWLR at 181.
It is not necessary to express any final opinion on whether the Court of Appeal was correct in its finding that the approach taken by the valuers was contrary to law. There is no doubt that there was a significant risk that their approach would be rejected as unreliable because it was dependent on many assumptions about the income to be derived from and the profitability of the market development. Mr Hemmings QC had advised on that risk although it appears that his advice was not passed on to Mr Schwaiger or to junior counsel. However, each valuer did assign a value to the resumed land as a vacant site, although only Mr Egan arrived at that value having regard to the sale of comparable land. It is difficult to understand how that part of the valuations could be described as “legally flawed”. Indeed there are two decisions of the Supreme Court of Canada, Halifax v S Cunard & Co [1975] 1 SCR 458 and Municipality of Metropolitan Toronto v Loblaw Groceterias Ltd [1972] SCR 600 that support the approach taken by the valuers in arriving at their value of the resumed land as a vacant site.
In Loblaw Groceterias the Supreme Court was required to consider what was a permissible approach to fixing the amount of compensation for the expropriation of vacant land that was uniquely suited for development as a shopping centre. Spence J delivered the judgment of the Court. He said, that in the case of the expropriation of vacant land and especially vacant land that was uniquely adaptable for a particular purpose, there were two possible approaches to fixing the amount of the award. Those methods were the comparative method and the land residual method. He described the comparative method as the consideration of actual sales of like lands in a like area and a determination from such comparison of the going market value of the land in question at the date of the expropriation. The second method he explained was a much more sophisticated process which:
“takes as its starting point, the purpose for which the lands were purchased which, to quote the words of (the trial judge) were for ‘developing a shopping centre of sorts’, determining by a series of very detailed and expert calculations just what sort of shopping centre would be the highest and best use of the land, the estimate of the income which would be obtained were such type of shopping centre permitted on the lands, taking the cost of erecting the shopping centre and taking the difference between the capitalised income from the lands and the cost of erection of the centre as being the residue assignable to the value of the lands.”
The decision of the Supreme Court in Halifax is to the same effect. The land residual method was the method employed by both Mr Parkinson and Mr Woodley in arriving at the value of the resumed land as a vacant site. As presently advised we do not read Rajah Vyricherla or Turner to require a finding that this method of valuation is impermissible. However, we do point out that Halifax and Loblaw Groceterias were not referred to in argument before Cripps CJ nor were they referred to in argument before the Court of Appeal.
By majority, the Court of Appeal did find that Cripps CJ had erred when dealing with the claim for special value. The Court of Appeal was of the view that Cripps CJ may not have assessed the special value of the land in accordance with proper principles and remitted the case to the Land and Environment Court to determine what additional compensation (if any) should be allowed for special value. It will be necessary to return to the reasons given by the Court of Appeal for its conclusion that Cripps CJ may not have properly assessed the special value of the resumed land later in these reasons.
It is convenient at this point to say something about certain of the principles that govern the determination of compensation for land that has been compulsorily acquired. In Yates, 24 NSWLR at 159, Kirby P said of these principles that many of them appear “to fresh minds to be ambiguous and contentious” while others of them “appear to be arbitrary categories of indeterminate reference, designed as much to obscure the judicial leaps to judgment that are required in these cases as to provide guidance about when, and how far, to leap.” The resolution of this case will depend not so much on how these principles might appear to “fresh minds” but how they should have been understood and applied by solicitors who professed to have specialised knowledge of them and by junior counsel who for most of his working life, both as a valuer and as a member of the Bar, had practised in the field.
In cases of compulsory acquisition the dispossessed owner is entitled (in the absence of statutory qualification) to compensation for the loss suffered by the owner from the taking of his land (The Moreton Club v The Commonwealth (1948) 77 CLR 253 at 257) so as to place him in a position as near as possible to that he was in before the taking (Russell v Minister for Lands (1898) 17 NZLR 241). Commonly the loss of the dispossessed owner will be the market price of the land taken. The method for determining that market price was authoritatively stated in Spencer v The Commonwealth (1906-1907) 5 CLR 418. What is required “is an estimate of the price which would have been agreed in a bargain between a vendor and purchaser each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business consideration”: Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Ltd (1947) 74 CLR 358 at 367. The best evidence of this value is that of comparable sales of other land if such evidence is available: TheCommonwealth v Arklay (1951-1952) 87 CLR 159 at 170.
However it is not unusual for a dispossessed owner to incur a loss which is more than the market price of the resumed land. It is well settled that the owner of land compulsorily taken is entitled to recover as compensation the value of the land to him, not to the expropriating party, and the market price is not necessarily the proper test. In Stebbing v The Metropolitan Board of Works (1870) 40 LJQB 1 at 5 Cockburn CJ said:
“When Parliament gives these compulsory powers, and provides that compensation shall be paid to a person from whom property is taken, for the loss which he sustains by reason of his property being taken, the sense of the matter is that he shall be compensated to the extent of his loss, and that his loss shall be tested by what was the value of the thing to him, not by what will be the value when the Board acquires it.”
In Eagle v Charing Cross Railway Company (1867) 30 LJCP 297 at 303 Bovil CJ said:
“It cannot be said, to my mind, consistently with justice, that a man’s damage is to be ascertained with reference to what he could sell his property for. He may say, ‘I do not desire to part with it.’”
In the case of Bailey v Isle of Thanet Light Railways Company [1900] 1 QB 722 at 724 Channel J said:
“I think our judgment must be for the claimants. The intention of the parties to use the land for a particular purpose may properly be taken into account. Compensation must always be assessed on the basis of a value of the premises to the particular claimant. The matter may be tested in this way. Suppose the land taken consisted of trade premises to which a goodwill was attached. The question for the Tribunal which had to assess the compensation would be, not what was the market value of the premises, but what was their fair value to the trader, including the goodwill.”
Most usually in this connection reference is made to the opinion of the Privy Council in Pastoral Finance Association Limited v The Minister [1914] AC 1083. There Lord Moulton, who delivered the opinion, said at 1087:
“The appellants were clearly entitled to receive compensation based on the value of the land to them. This proposition could not be contested. The land was their property and, on being dispossessed of it, the appellants were entitled to receive as compensation the value of the land to them whatever that might be.”
Lord Moulton explained that the formula to be applied to determine the compensation payable to the dispossessed owner is that which a prudent purchaser in his position would be willing to give for the land rather than fail to obtain it.
In other words, if the dispossessed owner is to receive compensation to place him in the position which he was in before his land was compulsorily acquired, the measure of compensation must take account of the peculiar value to the owner of the property compulsorily acquired. The peculiar value to the owner of resumed land is commonly referred to by the shorthand expression “special value”. It should be emphasised that compulsorily acquired land will have no special value based on motives or considerations that cannot be measured by any economic standard (Lake Erie & Northern Railway Co v Brantford Golf and Country Club (1917) 32 DLR 219 at 229) or arising from collateral circumstances (Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 at 573-4).
In Canada it has been held that the special value can only arise where the owner is actually using the land for a special purpose (Re LeBlanc and City of Halifax (1967) 66 DLR (2d) 15 at 22) or when the use for a special purpose was in immediate contemplation (Greenough v Minister of Lands and Forests) (1974) 10 NSR (2d) 598 at 612). But it is recognised that additional compensation, that is additional to the market value of the resumed land, may be allowed for the “special adaptability” of the resumed land for as yet unrealised possibilities or potentialities not reflected in market value: see Re Loblaw Groceterias Co Ltd and Minister of Highways for Ontario (1963) 42 DLR (2nd) 17. The difference between the two concepts was explained by Hodgins JA in Re Schooley and Lake Erie & Northern Railway Co (1915) 25 DLR 537 at 541:
“For the sake of clearness it may be mentioned that ‘special value’ refers to the present use of land, and means its added worth to the owners for the actual and particular use to which it is being put, and for which it is specially fit: while ‘special or exceptional adaptability’ refers to an apparent but future use to which the property may be, but is not now, put, and for which it is particularly adapted”.
The principles are the same in Australia where “special adaptability” is seen as a component of the market value of the resumed land rather than as a separate and additional component of the compensation that is payable to the dispossessed owner. For example, in Turner 95 CLR 245 the High Court considered the compensation that was payable to the dispossessed owner of unsubdivided land that was capable of being subdivided provided that certain works were undertaken. The Court held that is was impermissible to determine that compensation as the present value of the gain to be derived from the subdivision and sale of the land. But as Dixon CJ said (at 268), “the value of the land was necessarily affected by all the advantages which the land possessed and these might be a matter of future or even contingent enjoyment. Future advantages or potentialities must not be excluded.” That is to say, although the land must be valued in its condition at the time of resumption the potential use to which the land can be put must be taken into account if it is not otherwise reflected in the market value of the land. In valuing that special adaptability it is the present value of the future potentiality that must be determined.
Land will have special value if it has some special suitability for a business or an activity carried on or to be carried on by the owner. That special suitability need not arise from any physical or legal attribute of the land: Housing Commission of NSW v Falconer, supra, at 573. While it may arise from some physical or legal attribute it can also arise from some use made or to be made of the land. However, the special suitability must be peculiar to the dispossessed owner: Arkaba Holdings Limited v Commissioner of Highways [1970] SASR 94 at 100. The reason why the special suitability must be peculiar to the dispossessed owner is that if it is not peculiar to him then the advantage should be reflected in the market price of the land, it being a requirement that the market price be ascertained by reference to its highest and best use (that is the use that would bring about the highest economic value on the open market): Turner, supra, at 264; Minister Administering the Heritage Act 1977 v Haddad (1988) 67 LGRA 438 at 444; Apro Developments Ltd v Province of British Columbia (1977) 15 LCR 97 at 101.
To summarise, the potentiality or adaptability of land should properly be considered when assessing the market value of the land if that potentiality or adaptability adds to the value of the land making its highest and best use different from its use at the date of resumption. But if the potentiality or adaptability is peculiar to the dispossessed owner then it will not be taken into account in ascertaining the market value of the resumed land but falls to be compensated as special value.
There will be many cases where the dispossessed owner is well advanced in the planning of and preparation for the realisation of the potentiality of the resumed land to the point where that potential use is imminent. Further, the dispossessed owner may have incurred considerable expenditure in reaching that point. In principle there is no reason why the dispossessed owner should not be compensated for the planning and preparation that has resulted in the imminent realisation of the potentiality of the resumed land. Prima facie it should be assumed that this planning and preparation is of economic value to the dispossessed owner and should be the subject of compensation as a consequence of the compulsory acquisition of his land.
One difficulty that might arise in determining how the dispossessed owner should be compensated for this economic value is whether that value should be included as part of the market value of the land resumed or whether it should be treated as special value to the owner. If the planning and preparation can be of advantage to a hypothetical purchaser of the land using it in the same general way then it should be included in the market value of the land. On the other hand, if the planning and preparation is of peculiar advantage to the dispossessed owner then the economic advantage should be the subject of compensation as special value.
In reality, some of the steps taken in the planning of and preparation for a development are likely to add to the market value of the resumed land because they will be of advantage to the hypothetical purchaser and some are likely to result in special value. But so long as double recovery is avoided it will usually be of no practical consequence whether the dispossessed owner recovers his compensation as market value or as special value provided he does in fact receive compensation for the advantage resulting from bringing a proposal to a state of imminent development.
It is now necessary to return to the decision of the Court of Appeal to explain why it remitted the compensation claim to Cripps CJ to properly assess the special value of the resumed land. In his reasons Handley J referred to the fact that Yates had carried out work etc. that put it in the position where it could construct a market on the land more quickly than any hypothetical purchaser. This work etc. gave Yates an advantage that was of economic value. However, Handley J was of the view that Cripps CJ had failed to take this economic value into account in determining the special value of the land and that failure was an error of law.
When the case returned to Cripps CJ for his reconsideration counsel for Yates sought leave to reopen the case to lead evidence to quantify the economic value to Yates of being in a position to develop a market on the land immediately. The evidence that was sought to be led concerned the holding costs that would be saved and the additional building costs that would be avoided by an immediate development of the land. However, Cripps CJ refused leave to reopen the case. His Honour also refused to increase his award. He said that in arriving at the quantum of his award he had in fact taken into account not only the size and location of the land in connection with its suitability as a market but had also taken into account the work done and expenditure incurred by Yates in bringing the proposed development to a position where it could occur immediately. Cripps CJ said that he had estimated the economic value of these factors to be worth $500,000 approximately and that amount had been added to the market value of the land which he had determined by reference to the sales of comparable land: see Yates Property Corporation Pty Ltd v Darling Harbour Authority (unreported, Land and Environment Court, Cripps CJ, 1 April 1992).
When the reasons for decision are read in conjunction with the reasons for the original decision it is apparent that Cripps CJ had determined the special value of the land to Yates by taking into account both the fact that the land was suitable for development as a market (a matter that strictly should have been taken into account in determining its market value) and the advantage to Yates of being in a position to develop the land more quickly than would a hypothetical purchaser as a result of the work done and the expenditure incurred.
Yates again appealed to the Court of Appeal. This time the appeal was compromised when the Authority agreed to pay to Yates an additional sum of $1.25 million. In the result Yates has received $500,000 for special value that is comprised in part as compensation for the potential use of the land as a market and in part as compensation for the advantage to Yates of the work and expenditure incurred in bringing the proposed market to a state where it was capable of immediate implementation. It is not possible to ascertain how Cripps CJ would have apportioned the sum of $500,000 between those two components. The settlement sum of $1.25 million is wholly attributable to the second component but fairness requires that sum to be apportioned between compensation and interest on that compensation to ascertain what additional sum Yates received for special value. Based on a constant rate of interest of 12 per cent per annum over the relevant period of approximately seven years, the amount received for special value is approximately $ 565, 436 and the balance represents interest.
Yates claims that it should have received a substantially greater sum by way of compensation for the work performed in bringing the project to a state of imminent development. It says that but for the negligence of Abbott Tout and counsel it would have been awarded an additional $4 million to $6 million by way of compensation. It brought an action against Abbott Tout, Mr Webster and Mr Simos where the principal allegation made was that each of them had negligently failed to investigate, prepare and present Yates’ claim for compensation in a way that enabled the Land and Environment Court to award Yates the compensation to which it was entitled. The contention was that if the claim had been properly investigated etc. evidence would have been led along the lines sought to be adduced at the second hearing before Cripps CJ and on the basis of that evidence his Honour would have awarded a higher sum by way of compensation. Thus the result of the negligence, so the argument goes, was that Yates was denied the chance of obtaining a higher award and Yates sought to recover damages for the loss of that chance.
The action was heard by Branson J. Her Honour dismissed the claim against each respondent. She found that Abbott Tout had not been negligent in the conduct of the retainer on behalf of Yates for the reason that Abbott Tout had retained competent and experienced counsel and were entitled to rely on the advice of counsel as to the appropriate manner in which the claim should be investigated, prepared and presented before the Land and Environment Court. Branson J also found that neither counsel was negligent in the manner in which he had prepared and presented the claim on behalf of Yates and, even if he had been negligent, he was immune from liability. Her Honour ordered Yates and one of its directors (Mr Ian Yates) to pay the respondents’ costs, in part on an indemnity basis.
There are three appeals. The first is by Yates against the order dismissing the claims against Abbott Tout and Mr Webster. The second is by Yates from the orders that it pay the respondents’ costs. The third is by Mr Yates against the order that he be liable with Yates to meet those costs.
It is necessary to make some observations about the manner in which the parties conducted the case before Branson J because it seems to us that the parties lost sight of the real issue that required determination.
Yates put its case as follows. It was in an advantageous position at the date of the resumption of its land relative to any other prospective purchaser of the land wishing to build a market on the land. That advantage was of economic value. That economic value should have been taken into account as part of the special value to Yates of the resumed land. The state of the authorities that existed at the time, all of which the respondents ought to have been aware of, in particular Kennedy Street Pty Ltd v The Minister [1963] NSWR 1252 and Baringa Enterprises Pty Ltd v Manly Municipal Council (1965) 15 LGRA 201, made it clear that the advantage was compensable as part of the special value of the land. The respondents failed to lead evidence and conduct the case in a way that would see Yates obtain an appropriate award for that special value if the manner in which its valuers had assessed special value was rejected by the Land and Environment Court.
The respondents sought to meet this case by disputing that the advantage to Yates of being in a position to develop the market was to be taken into account in determining the special value of the land. Their case was that Spencer’s Case required it to be hypothesised that the hypothetical purchaser should be deemed to have available to him all of the knowledge and information about the proposed market that was in the possession of Yates and that it was to be assumed that Yates would make available to this hypothetical purchaser everything it could to assist the hypothetical purchaser to be in a position to develop the land immediately in accordance with the existing development approval and building approval. Thus, so it was said, no occasion arose to consider whether Yates might have any advantage with respect to the development of the resumed land as compared with the hypothetical purchaser. It was for this reason that evidence identifying or quantifying the value of that advantage was not adduced.
It will be apparent that both sides proceeded on the assumption that if Yates was in a position to develop the market immediately by reason of the work undertaken before its land had been resumed, that resulted in an advantage that was of economic value and for which it was entitled to receive compensation. Indeed Mr Simos said in evidence that it was “obvious” that an ordinary hypothetical purchaser who intended to develop the resumed land immediately after purchase in accordance with the existing development approval and building approval would pay a higher price for the land. We agree with this observation.
The difference between the parties was that Yates submitted that the economic value of this advantageous position formed part of the special value of the land and the respondents asserted that it should form part of the market value of the land. Here each party proceeded on an unfounded assumption. The unfounded assumption made by Yates was that if its advantageous position was not compensable as special value it was not otherwise compensable. The unfounded assumption made by the respondents was that the Land and Environment Court was in a position to assess that advantageous position as part of the market value of the land. The latter assumption was unfounded for the reason that no evidence had been led to properly identify or quantify the economic value of being in a position to immediately commence the development of a market.
Later it will be necessary to consider how these matters will affect the outcome of this appeal. But before doing so it is convenient to address the issues in the manner in which they were raised by the parties both before this Court and before the trial judge.
In Spencer’s Case, Isaacs J said (at 441) that in order to arrive at the market value of resumed land it is to be supposed that the hypothetical purchaser is:
“perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reasons soever in the amount which one would otherwise be willing to fix as the value of the property”.
Prima facie, therefore, work done and knowledge acquired that would affect the value of the land should be taken into account when assessing its market value. But what of work done and knowledge acquired that is of value to the dispossessed owner but is not connected with the character or quality of the land? Take as an example a set of circumstances not dissimilar to the facts of this case. A dispossesed owner of commercial land has prepared plans for a commercial building designed for a particular tenant who he knows will take a lease of the building and has engaged a builder to construct that building (or it might be that the owner is the builder) and is in a position to commence building works as at the date of resumption. The dispossessed owner would no doubt regard the land as more valuable to him than the market price of that land determined by comparable sales of other commercial land. Assume that the owner is willing to provide to the hypothetical purchaser his knowledge of the intentions of the prospective tenant and the plans for the proposed building and that the hypothetical purchaser is willing to undertake the same development as the dispossessed owner employing the same builder to carry out the works. Of course, it will also be necessary to assume that the builder is willing to carry out the work for this hypothetical purchaser. It is obvious that the hypothetical purchaser will pay more for the resumed land than its value as a commercial site determined by comparable sales. Is the additional amount that the hypothetical purchaser is willing to pay part of the market value of the land?
The answer is to be found in the following proposition. The work undertaken or the knowledge acquired by the dispossessed owner will be taken into account in determining the market value of the land if that work or knowledge can be of advantage to any hypothetical purchaser of the land because it would have the practical effect of adding to the character or quality of the land. On the other hand, if the work done or the knowledge acquired is of a type that does not affect the character or quality of the land then it will not be taken into account in assessing the market value of the land. This is not to say that the hypothetical purchaser may not be interested in acquiring the plans for the building or engaging the builder retained by the dispossessed owner. But if the hypothetical purchaser is willing to pay a higher price for the land in order to obtain the plans and the services of the builder he would be paying a price for the plans etc. in addition to paying for the land.
Another example of what is no doubt an everyday occurrence will serve to make the point clear. An owner of a furnished house is willing to sell his house in an unfurnished condition but if the purchaser is willing to pay a higher price than its market value then the owner will sell it as a furnished home. Does the fact that the owner is willing to pass over his furniture add to the market value of the house? Plainly it will not although the purchaser is willing to pay more for the house to obtain the furniture. If the purchaser does pay more to obtain a furnished house the purchase price does not only represent the value of the home, a component of the purchase price represents the value of the furniture.
The authorities to which we will now refer support the views we have expressed. First there is Kennedy Street a decision of Hardie J. There the dispossessed owner had purchased unsubdivided land for the purpose of subdividing it and selling it in subdivided lots. In furtherance of its intention the owner had a survey plan prepared and had made application for the approval of that plan to the relevant local authority. The plan was approved in principle. The owner had given careful consideration to the proposed subdivision, had finance for the development in place and had spent considerable amounts in relation to the subdivision application. On the question whether those facts gave rise to a claim for special value Hardie J said (at 1256):
“the authorities lead me to the conclusion that the subject land had some special value to the plaintiff company over and above its market value. The matters and considerations that have caused me to reach that conclusion arise from the relationship of the plaintiff company to the subject land. The plaintiff company was incorporated to acquire, develop and sell the land. The finance for the project was to be provided equally by the two owners of the shares of the company ... Between the date of the contract to purchase the land and the date of its resumption the company had given close and careful consideration to the problems associated with the proposed subdivision. It had paid stamp duty and legal fees to acquire it; it had also paid survey fees and engineering fees, and the Council fee in relation to the subdivision application. The knowledge and experience acquired by [the director of the plaintiff] and the time spent by him in examining the land and taking steps appropriate to ensure an expeditious approval of the subdivision were, in the event that happened, of no value to the company.”
His Honour also pointed out that the resumption had deprived the plaintiff of a profitable venture and that it would take some months for it to re-establish itself in the business of selling vacant land in the subdivision. His Honour then continued:
“I am satisfied that the plaintiff company would, rather than lose the opportunity of acquiring the land, have paid a price substantially in excess of the market value of £19,500. I am of the opinion that the plaintiff company, having expended £840 in the project over and above the deposit paid and being in a position to proceed at once and expeditiously with the completion of the purchase and with the subdivision and the sale of the land, would have been prepared to pay an additional £2,500 over and above the market value of the land.”
Kennedy Street was approved by a majority of the Full Court in New South Wales in Chapman v The Minister [1966] 2 NSWR 65 and both cases were cited with approval by Starke J in Yarn Traders Pty Ltd v MMBW [1970] VR 427 at 430.
It was submitted that Kennedy Street is only authority for the proposition that special value is to be determined by how long it would take a dispossessed owner to be in the same position on an alternative site as he was at the date of resumption in respect of the resumed site. It is quite clear that is not the ratio of Kennedy Street. Kennedy Street stands for the proposition that special value is recoverable when the dispossessed owner has been deprived of land that he is in a position to develop at once and expeditiously. That advantage gives to the dispossessed owner a benefit over and above the market value of the land. It is true that in Kennedy Street Hardie J did refer to the fact that it would take the plaintiff some time (around two to three months) to re-establish itself in the business of selling vacant land. As the reasons make clear the plaintiff was deprived of a number of advantages by reason of the resumption “one of the most important being the length of time reasonably required by the plaintiff to re-equip itself for [its] business” (emphasis added): see [1965] NSWR at 1256. The plain reading of the case shows that special value was assessed not only by reference to the time the plaintiff might have taken to re-establish itself but also by reference to the other factors identified by Hardie J as representing the opportunity foregone by the resumption.
The second decision to which reference should be made is Baringa Enterprises. In that case the dispossessed owner had acquired land for the purposes of development as a joint shopping and residential site. It spent money in bringing the land to a point where it was “in a condition ripe for development”: [1965] LGRA at 204. Hardie J found that the owner would have been able to undertake the development with less waiting and preparatory time than a new owner (that is a hypothetical purchaser) and “thus the plaintiff company would have had an advantage over other purchasers, in that it would not have had to bear so much by way of carrying costs; also it would have had some benefit from the substantial expenditure by way of fees paid to architects and others for and in relation to the plans and specifications”: [1965] LGRA at 205. His Honour also found that the dispossessed owner could have obtained building approval for a type of development better than and more extensive and more profitable than could have been obtained by a new owner. The reasons do not disclose why this was so. Accordingly, Hardie J concluded that: “Looking at the matter from all aspects and bearing in mind the plaintiff’s substantial expenditure on the project over and above the cost of the land, some of which gave the land an added value in its hands and some of which was not reflected in added value the land had a special value over and above its market value to the dispossessed owner.”: [1965] LGRA at 205.
It is apparent that Hardie J considered that the land had special value to the owner not only because the dispossessed owner could undertake a development that was more profitable than a development undertaken by a hypothetical purchaser but also because the dispossessed owner was in an advantageous position for the reason that it could undertake its development more expeditiously than could a hypothetical purchaser.
Baringa cannot be explained on the basis that it is concerned with compensation for the time taken to acquire an alternative site. Baringa is an application of the principle found in Kennedy Street, namely that land will have a special value to its owner if that owner is in fact in a position where he can develop that site more expeditiously than could the hypothetical purchaser.
There are three further observations we wish to make about Kennedy Street and Baringa. First, the effect of these cases is that the advantage of being in a position to quickly realise the potentiality of resumed land is, as a general rule, to be treated as part of the special value of the land and not as a factor to be taken into account in assessing its market value. This accords with our view of how market value is to be determined.
The second observation is that in deciding whether land has special value to the dispossessed owner (or even in deciding whether certain advantages should be taken into account in assessing the market value of land) the decision is to be made in the context of what a dispossessed owner in the position of a prudent purchaser would pay for the land. True it is that the cases give guidance on how that sum is to be determined. But common sense has some part to play in this exercise. And we think that the principles set out in Kennedy Street and Baringa are neither more nor less than an application of common sense to the question: How should the compensation payable to a dispossessed owner be determined?
The final observation we wish to make is that in assessing Yates’ claim for compensation Cripps CJ himself had formed the view, without the benefit of any argument, that Yates was entitled to be compensated for the fact that it had progressed its proposal to the point where that proposal was about to be implemented. Cripps CJ recognised that Yates would bid more for the land in that circumstance than would a hypothetical purchaser. The fact that Cripps CJ was able to reach that view without argument demonstrates how obvious it was that Yates was entitled to compensation for the work etc. undertaken by it to be in that position.
The learned trial judge did not determine whether Spencer’s Case required the economic value to Yates of being in a position to develop the land to form part of the market value of the land or whether it was to be brought to account as special value. Her Honour held that it was not necessary for that issue to be decided. She described the relevant issue to be, at least so far as the case against counsel was concerned, whether they were negligent in forming the views which they did as to the proper understanding of Spencer’s Case. Her Honour found that the views held by counsel “were views which it was reasonably open to barristers of their respective seniorities experienced in valuation law to hold”. She also found that having regard to the manner in which evidence of special value was to be given by the valuers to be called by Yates, counsel were not under a duty to require those valuers to consider and give evidence concerning every alternative method of assessing special value which could be advanced consistent with legal principle.
With regard to the claim against Abbott Tout the learned trial judge found that there was no negligence by that firm in the conduct of its retainer. This was for the reason that it was reasonable for Abbott Tout to accept the appropriateness of the approach taken by counsel and that the firm’s failure to advise Yates that there was some other basis upon which special value could be propounded did not mean that they failed to conform to the standard of reasonable care demanded by law. Moreover, her Honour said that even if Abbott Tout had given advice that there was some other basis to claim special value, counsel would have advised to the contrary and counsel’s advice would have prevailed with the liquidator. Accordingly, her Honour concluded that even if Abbott Tout had been negligent that negligence was not causative of any loss.
This formulation was also accepted by Mason CJ in Gianiarelli (see 165 CLR at 579) and by implication by Wilson and Dawson JJ each of whom regarded the common law position to be correctly stated by the majority in Saif Ali.
The formulation of the relevant principle by Brennan J in Gianiarelli is to a similar effect. He said (at 579):
“neither a barrister nor a solicitor may be sued by a client in respect of any act done or omission made in the conduct of the client’s case in court or in the making of preliminary decisions affecting the way in which the case is to be conducted when it comes to a hearing.”
In this case the issue that requires consideration is whether the failure to advise of the existence of an item of compensation and the failure to take the steps that should have been taken to have that item of compensation properly assessed so that it could be reflected in the award of compensation, albeit as an alternative method of assessing compensation, falls within the immunity.
A convenient starting point to consider this question is to return to the decision of Saif Ali where the House of Lords held that on the facts of the particular case the immunity from suit did not attach. There a barrister had been briefed to draw proceedings for a claim to be made by a passenger who was injured in a motor car accident. He drew a claim against the owner of one of the two vehicles involved in the collision on the basis that the driver of the other vehicle was the owner’s wife and she had been driving as his agent. The barrister did not advise that there was a cause of action against the wife or against the driver of the car in which the plaintiff was a passenger. The claim against the owner was discontinued but by that time the claim against the two drivers had become statute barred. The barrister was sued for negligence. It was held that the claim fell outside the area of immunity. The case stands as authority for the proposition that a barrister will not take the benefit of the immunity if he negligently fails to advise on the existence of cause of action and against whom that action lies.
Here the complaint is of a different character. It is that the barrister failed to advise on an item of loss in respect of which compensation was recoverable. In the case of a common law claim for negligence arising out of a motor car accident comparable negligence would be the failure to advise that a head of damage, such as loss of earnings or loss of earning capacity, is recoverable if the defendant is found to be negligent.
Such a complaint is concerned with conduct that is not in any relevant sense inextricably linked with the presentation of a case in court in that it affects the way in which the case is to be conducted in court. True it is that the conduct may dictate the way in which a case is run in the sense that a particular head of damage will not be claimed. But it is not intimately connected with any particular conduct that takes place in court so that it might be described as a preliminary decision, that is preliminary to decision-making that takes place in court.
In Macrae, supra, it was suggested that counsel’s negligent advice whether there is a cause of action may fall within the immunity: see Macrae, supra, at 24-25 per Beazley JA. We do not think that this is correct. It is inconsistent with Saif Ali where the substance of what the barrister did was to fail to advise on the existence of a cause of action against a prospective defendant. It is also inconsistent with the need to ensure that the immunity does not extend beyond the policy considerations that give rise to it. Advice concerning the existence or otherwise of a cause of action has no relevant connection with the in-court conduct of counsel in the sense that no act of counsel in court depends upon that advice or the failure to give it. The in-court conduct is not dependent upon the failure to plead a case against a particular defendant nor is it dependent upon the failure to plead a cause of action against an existing defendant. The same is true when the complaint is that an item of damage should have been but was not included in the claim.
Accordingly, we are of the opinion that Mr Webster is not immune from suit in respect of his negligence. We should also mention that Abbott Tout did rely on the immunity as well but its conduct does not fall within it for the same reason the immunity will not avail Mr Webster and for the additional reason that Abbott Tout did not engage in any conduct as counsel: of course the immunity would extend to a solicitor acting as counsel.
The appeals should be allowed. The orders made by the trial judge on 5 June 1997 dismissing the application against Abbott Tout and Mr Webster should be set aside and in lieu thereof it should be ordered that the proceeding be remitted to a judge of the Court for the assessment of damages. In the absence of agreement it will not be possible for that judge to be the trial judge because of facts disclosed to her Honour during the argument on costs. The order as to costs made on 14 August 1997 should be set aside. If, after taking into account the damages for special value Yates has already received, Yates recovers further damages then it should have its costs of the trial. In that event although Yates’ substantive appeal against Mr Simos did not proceed, we do not consider that he is entitled to his costs of the trial: compare Ritter v Godfrey [1920] 2 KB 47 at 60-61.
I certify that this and the preceding forty (40) pages are a true copy of the Reasons for Judgment herein of the Honourable Justices Drummond, Sundberg & Finkelstein JJ
Associate:
Dated: 5 August 1998
Counsel for the First Appellant: D Quick QC
D Raphael
Solicitor for First Appellant: Bruce & Stewart Counsel for the First
Respondent:
R MacFarlane QC
A Bell
Solicitor for the First
Respondent:Minter Ellison
Counsel for the Second JLB Allsop SC
Respondent: PR Whitford
Solicitor for the Second Corrs Chambers Westgarth
Respondent:
Counsel for the Third R Conti QC
Respondent: S White
Solicitor for the third Moray & Agnew
Respondent:
Date of Hearing: 16-20 March 1998
Date of Judgment: 5 August 1998
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